Stocks Roar To Record Highs

Stocks Roar - The Mott Capital 4Q'19 Investor Letter

By the broadest margin, 2019 was the best year of performance for the Mott Capital Thematic Growth Composite, which soared by 35.85% (net of fees and transaction costs; individual account returns may vary). The portfolio crushed the S&P 500 Index gain of 28.88% excluding dividends, and easily beat the S&P 500 Total Return Index increase of 31.45% inclusive of dividends. The S&P 500 also managed to exceed my target for 2019 of 3,200, finishing off on December 31 at 3,231. It was quite a year.

Quarterly Summary

Thematic Growth Composite Performance

Thematic Growth Composite +35.85%

  S&P 500 Total Return Index +31.45%

  S&P 500 Index+28.88%

It became clear by the start of the fourth quarter that the overblown fairytale calling for a recession in 2019 had all but vanished. Additionally, the Fed made life easier too, clearly signaling  it was in no rush to take back any of its three interest rate cuts it made in 2019, reducing the fed funds rate from a range of 2.25 to 2.5% at the beginning of the year to a range of 1.5% to 1.75% by October. Instead of tapping the brakes on growth with upwards rate tweaks, the Fed now seems poised to allow inflation to run above its symmetric 2% target.Also, with the pending signing of a phase-one China trade deal on the table during the fourth quarter, there was nothing to hold the stock market back. The equity market broke free of its 22 months of stagnation, essentially becoming unleashed from the fears that gripped it.

I continue to believe that stocks have further to rise in 2020, but the gains will not be as robust. Instead of entering a year trading at depressed and oversold prices, stocks entered 2020 trading at record highs and fairly valued levels so I don’t anticipate the same significant returns we witnessed in 2019. However, I do believe that in this low-interest-rate environment, along with a positive technical setup and forecasts for substantial earnings growth, the S&P 500 can approach 3,600 in 2020, which is higher than my previous forecast for around 3,400 in my third quarter letter.My new target number implies a gain of about 11.5% from the S&P 500’s level on December 31, 2019.

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Disclaimer: This article is my opinion and expresses my views. Those views can change at a moment's notice when the market changes. I am not right all the ...

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